The Bernanke legacy [Editorial]

Outgoing Federal Reserve Chairman Ben Bernanke, 60, probably won't win many popularity contests. He's frequently been vilified by the political left for doing too little and by the right for doing too much. Most Americans probably have no idea what he does — and, whether in full-blown crisis or too-slow growth, the U.S. economy, his chief responsibility as head of the nation's central bank since 2006, has been underwhelming for most of his tenure.

But he will be remembered as being the right man for the times. A student of the Great Depression and a former economics professor at Princeton, he likely knew better than anyone in the BushWhite House what was at stake when so many major U.S. investment banks were poised to fail in the panic of 2008. The solution involved unprecedented government intervention, including the Troubled Asset Relief Program (TARP) and the bailout of insurance giant AIG.

Those actions remain controversial today and are easily second-guessed. Nor, for good or bad, did he act alone. He worked closely with Henry Paulson, who served as U.S. Department of Treasury secretary under President George W. Bush, and Timothy Geithner, who was president of the New York Fed and would later become Barack Obama's first treasury secretary. But most economists believe such extraordinary intervention was necessary, particularly after the bankruptcy of Lehman Brothers, the nation's fourth largest investment bank, put the stock market in veritable free fall and took the U.S. economy along with it.

More recently, Mr. Bernanke's policy of ultra-low interest rates and bond purchases have injected hundreds of billions of dollars into the economy that helped stimulate growth (and a rather spectacular comeback in stock values). Under his leadership, the Federal Reserve took actions on behalf of the economy that Congress and the White House could not, particularly given the partisan gridlock of the last several years.

If one had the benefit of a time machine, perhaps it might be possible to find out what would have happened had the Federal Reserve not adopted such an aggressive response to the global financial crisis — or a more aggressive one. Had Mr. Bernanke and his colleagues rushed to the aid of Lehman as they did earlier with Bear Stearns (now a part of JPMorgan Chase), for instance, might the decline not have been as great? Conversely, if there had been no TARP or interventionist strategy at all, might the short-term pain have been greater but the economic comeback more spectacular, too?

Has Mr. Bernanke's tenure been mistake-free? Almost certainly not. He, like most everyone else, didn't spot the housing bust coming — or recognize the danger of subprime lending. But a second Great Depression seemed quite possible in the bleakness of six years ago, and whether there were missteps or not, Mr. Bernanke successfully steered the nation away from one. That alone may make him the most consequential Federal Reserve chairman in history.

A full assessment of his two terms in office is probably not possible without the benefit of time. Some fear that bond-buying has created its own financial bubble and that tapering will pose an enormous challenge to his successor, Janet Yellen. Certainly, there are signs of renewed uncertainty — or at least of an approaching bear market — but it's a far better, more hopeful economy than what the nation faced in 2008-2009 when unemployment was growing like an epidemic and no one knew exactly where the bottom might be found.

You can be certain Mr. Bernanke won't get his face carved on Mount Rushmore. The Wall Street Journal editorial board has already complained about what accolades he has received, his tenure having featuring too much market intervention for their liking.

A more reasonable review of the evidence suggests that the scenario that conservatives revile — that the nation's economy was on the precipice and the Federal Reserve came to its rescue — is probably not too far from the truth. For this, Americans should be grateful for the MIT-educated man from Dillon, S.C., who once worked summers at its famous South of the Border roadhouse and had both the knowledge and the courage to take the measures needed to keep the U.S. economy afloat during one of its darkest hours.